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In State of the Union, Obama calls for free-trade pacts of historic scope

Obama's State of the Union bid to create vast free-trade areas with Europe and Asia signals that, by the end of his presidency, two pillars of a globalized trading system could be in place.

By Staff writer / February 13, 2013

President Obama meets workers in the audience following remarks at Linamar Corporation, a manufacturer of truck parts in Arden, N.C., on Wednesday. Obama visited the plant to promote economic policies outlined in his State of the Union address on Tuesday.

Jason Reed/Reuters

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WASHINGTON

Cheaper Italian pasta in US supermarkets? More Mustangs prowling the byways of Provence?

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President Obama’s announcement in his State of the Union address Tuesday night that the United States and European Union will begin negotiating creation of the largest free-trade area in history may have visions of cheaper imports from the other side of the Atlantic dancing in consumers’ heads.

But perhaps the most significant impact of a trade partnership between two mammoth economies that already make up half of all global output – and a third of global trade – would be the streamlined investment rules and product standards and elimination of trade barriers that would become the model for international trade.

“This really is more global than it is bilateral,” says a senior European official.

For both US and EU officials, a transatlantic free-trade deal with global ramifications would be a way of getting around global trade talks launched in 2001, called the Doha Round, which have gone nowhere.

Negotiating a US-EU trade partnership, even as the US is negotiating a Trans-Pacific Partnership (TPP) envisioned as a prototype for a vast Asia-Pacific free-trade area, could mean that before the end of Mr. Obama’s presidency two major pillars of a globalized trading system would be in place.

With two of the world’s dominant economic powers trading based on streamlined and common rules and standards, other economies seeking to take part in the expanding global trading system would find it in their interest to adopt the same or at last similar rules and standards, trade experts say.

"The transatlantic relationship is so intertwined with the global economy that any amount of streamlining of standards and regulatory convergence is going to increase economic growth globally,” says Charles Dittrich, vice president for regional foreign trade initiatives at the National Foreign Trade Council (NFTC) in Washington. “Such a high level of cooperation and convergence between the US and the EU has the potential to serve as a basis for a broader adoption of common trade rules and standards with other countries.”

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